Answered: Due to erratic sales of its sole…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month.

b. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3
$
Total
Req 4
Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase
by $53,000 each month. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income
statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis,
as well as in total, for each alternative.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole
number.)
PEM, Inc.
Contribution Income Statement
Not Automated
Per Unit
0 $
0
Req 5A
0
< Req 5A
%
Req 5B
%
%
0%
$
Total
0
Req 5C
0
Automated
Per Unit
$
Req 5C >
0
%
%
%
0%
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Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing financial
difficulty for some time. The company's contribution format income statement for the most recent month is given below:
Sales (13,200 units × $20 per unit)
Variable expenses
Contribution margin
Fixed expenses
Net operating loss
$ 264,000
132,000
132,000
147,000
$ (15,000)

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